RIM will struggle to restore credibility: analyst

Tue Sep 20, 2011 5:27pm EDT
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(Reuters) - BlackBerry maker Research In Motion must launch innovative devices on schedule and offer credible earnings forecasts to win back the trust of investors made wary by its missteps, an analyst said on Tuesday.

In a note to clients, RBC Capital Markets analyst Mike Abramsky cut his price target on RIM shares to $29 from $35 and slashed his estimate for earnings per share for the current fiscal year by 11 percent, and for the next fiscal year by almost 19 percent.

RIM shares lost more than 4 percent to close at $22.73 on the Nasdaq on Tuesday.

Abramsky said RIM remains a potential buyout target due to its proprietary messaging services, global subscriber base and strong patent portfolio. He valued a takeout at $30 a share and named Microsoft, Cisco, IBM and Nokia as possible buyers.

An activist investor, Jaguar Financial, is talking to some of RIM's major shareholders about plans to empower RIM's board to look at options including spinning off patents or selling the entire company.

Abramsky's share-price target is still well above RIM's current share price, but the change moves RBC below the $31 average forecast of analysts. Analysts' forecasts for the share price range from a low of $18 to a high of $75.

In February, RIM shares changed hands for as much as $70, but the stock has slumped after a series of profit warnings, coupled with the botched launch of its PlayBook tablet computer, a competitor to Apple's iPad.

RBC's earnings per share estimates for RIM of $4.95 for fiscal 2012 and $5 for 2013 are about 10 cents a share higher than the average analyst estimate.

RIM said last week it now expects to reach only the low end of its previous forecast for earnings per share in fiscal 2012, which ends in March next year. The company had forecast earnings of $5.25 to $6 a share.   Continued...

<p>A person uses the new Blackberry Bold 9900 at a release party to promote the BlackBerry OS 7 devices in Toronto August 3, 2011. REUTERS/Mark Blinch</p>